The Osborne Judgement of 1909: Trade Union funding of political parties in historical perspective

James G. Moher | 02 December 2009

Executive Summary

The Osborne Judgement which the House of Lords delivered on 21 December 1909, was a landmark legal ruling. It held that the law did not allow trade unions to collect a levy for political purposes, specifically, to fund the infant Labour Party's organisational and electoral efforts.

The case had been brought by Walter Osborne, a branch secretary of the Amalgamated Society of Railway Servants (ASRS), and a Liberal Party supporter who objected strongly to his union's political levy, as he was hostile to what he saw as the 'socialist' Labour Representation Committee (LRC).

The emerging Labour Party was indeed subject to significant socialist influence from its foundation in 1900, despite its Trades Union Congress creation as a rather looser arrangement. Indeed, it changed its constitution in 1903 to require its union-sponsored candidates and MPs to sign a pledge committing them to accept the Labour Whip in Parliament.

The Railway Servants were amongst the strongest supporters of the emerging Labour Party, but their General Secretary, Richard Bell, refused to sign the new Labour pledge, which he saw as unduly restrictive of his working relationships with the very much larger Liberal group in Parliament.

The ASRS had already fallen foul of the House of Lords in the Taff Vale Railway case of 1901, which removed the immunity of trade union funds from prosecution during industrial disputes and cost the ASRS over £40,000. It galvanised the trade union movement behind the LRC as its vehicle to overturn that judgement, which was achieved through the Trade Disputes Act of 1906.

Meanwhile, the Osborne Judgement of December 1909 provoked outrage in Parliament and in the country, until it was reversed by the Trade Union Act 1913. This restored the legitimacy of union political funding, but required unions to ballot all their members and to allow individual members to opt-out of contributing to the levy. This remains the position today, with a five-yearly balloting requirement added in 1984.

This episode remains of considerable interest at a time when the question of political funding is again under scrutiny and is likely to feature on the agenda of a future government. Depending on the colour of that government, it may also change the rules for trade union political funds. The historical perspective in this account may be useful to unions and politicians as they consider how to address this issue.

Introduction

There is nothing in the Trade Union Acts from which it can reasonably be inferred that trade unions as defined by Parliament were meant to have the power of collecting and administering funds for political purposes.

House of Lords, 21 December, 1909

With this ruling, the Law Lords struck down a practice which had been universally believed to be lawful for nearly forty years and called into question a central part of union activities. The uproar and disquiet it caused would reverberate across the Edwardian political world. The case was started by Walter Victor Osborne, a head porter at Clapton station in East London and secretary of the Walthamstow branch of the railwaymen's union, the Amalgamated Society of Railway Servants (ASRS). He challenged the union's compulsory political levy and funding of the Labour Party. No ordinary railwayman, Osborne was himself highly political: a former Marxist but now a fundamentalist libertarian and Liberal, he saw the levy as part of a plot by socialists to take over the unions. At that time, there were many like Osborne in all unions who were traditionally Liberal supporters, or who were simply averse to their union being tied to any political party. They naturally objected to paying the levy for the Labour Party and the accompanying pledge that all union-sponsored candidates and MPs should take the Labour Whip in Parliament.

Nonetheless, the socialist-minded activists' vision of a non-sectional, independent Labour Party separate from the established parties had gained increasing acceptance amongst the organised working class by the end of the nineteenth century. It was promoted skilfully by the ASRS and other unions with politically-minded leaders and by the avowedly socialist Independent Labour Party (ILP), in which Keir Hardie and Ramsay MacDonald were leading figures. In 1906, ASRS members voted heavily, (21,713 to 4,825), in favour of their levy and for a political fund, which enabled them to get three sponsored MPs elected. A growing number of other union leaderships also affiliated to the LRC. This trend accelerated after the notorious judgement of the House of Lords in 1901 which exposed all union funds to legal attack by employers claiming huge damages during industrial disputes. Perhaps because of what he saw as the spectre of this 'socialist' success, Walter Osborne was determined to challenge the legality of the political levy and began his action in the High Court in 1907. He lost, but pursued a successful appeal in the higher courts, leading to the House of Lords' judgement of December 1909. This declared all union political funding unlawful, reversing decades of union practice and leading many observers to suspect that the Law Lords were exercising extreme judicial bias.

Historians have generally seen Osborne as a tool of sinister anti-union⁄anti-labour forces. This paper re-examines those claims and sheds fresh light on the union background which gave rise to Osborne's challenge.

The railwaymen's union

The ASRS was founded in 1872 and had a membership of about 60,000 in 1909. It was the principal railway union, though the much smaller train drivers' union, ASLEF, was also a significant force. This was a key strategic industry at the time - with its network of about fifty railway companies stretching all over Britain and Ireland and a huge, expanding workforce of nearly 600,000. The ASRS represented the guards and other staff on the steam trains, most signalmen, brakesmen and pointsmen on the line, as well as many other grades such as porters and shunters in the stations and works depots.

Although not recognised for collective bargaining purposes by most of the railway companies, the ASRS, with over 600 branches, had considerable clout in that highly regulated industry. It also elected its General Secretary and five organising officers in the main centres of Britain and Ireland. This was a very branch, delegate-based, democratic union, at a time when branch meetings were well attended. It also elected all branch officers and its part-time Executive Committee of twelve at its annual congress, which was the supreme authority in the union. It even elected its delegations to the Trades Union Congress and the Labour Party. The Board of Trade had statutory oversight of railway charges (passenger and freight), hours of work and safety matters (accident levels being very high). Since 1897, the ASRS had been led by a highly respected General Secretary, Richard Bell (1859-1930), and under his direction had focused on Parliamentary lobbying to influence the private railway companies through this state regulation. Although their membership was growing, they faced hostile employers in the private railway companies who refused to recognise them. Bell favoured the resolution of disputes through conciliation and compulsory arbitration, arrangements which were then common in many other heavy industries such as coal, cotton, steel, engineering and shipbuilding. His election as MP for Derby in 1900, while still remaining a very hands-on leader of the union, reflected this Parliamentary focus. His record in achieving results for the railwaymen in Parliament was considerable. In 1901, with Liberal support, he had secured a major piece of legislation to regulate hours and accidents, and was preparing a Conciliation Bill which would have forced the railway companies to deal with the union in joint arbitration wage-fixing machinery.

'The dispute on the Taff'

Bell first ran into serious difficulties with his own Executive Committee and activists in 1900 over an industrial dispute with the Taff Vale Railway Company, which delivered coal from the pits around Pontypridd to Cardiff docks. It started as an unofficial strike in August 1900 over a range of discontents, but the involvement of a militant socialist organiser, James Holmes, in encouraging the walk-out without reference to headquarters or synchronisation of notices led to it being challenged legally. Bell therefore refused to make the strike official as it was in breach of the union's rules and procedures. However, Bell's decision was overturned at a stormy six-hour meeting of a specially-convened Executive Committee at their headquarters in King's Cross and the dispute was made official. Matters got out of hand when the company imported replacement labour to break the strike and were met by robust picketing by union activists. Violence ensued and the arrest and imprisonment of pickets followed. Bell was sent down to Wales and initially succeeded in securing an independent arbitrated settlement for a conciliation board on the pay issues and reinstatement of the men. But this unravelled over the next few months as Holmes and the company's anti-union general manager, Ammon Beasley, reneged on the deal as he and Holmes locked horns again. Since the Trade Union Acts of 1871-76, unions were thought to be immune from prosecution and awards of damages against their funds during such trade disputes. However, that protection was removed by the House of Lords in a 1901 judgement against the ASRS brought by the company under Beasley's direction. He then sued them for a huge damages award in 1902, amounting to £23,000 in damages, around £9,000 in legal costs, as well as their own legal bills of £10,000: in total almost an entire year's union revenue. The ASRS was fairly strong financially, having reserves of about £275,000, but it was still a huge blow. Bell and many branches of the union blamed Holmes for his 'indiscreet' conduct of the dispute. In Parliament, Bell acknowledged 'certain deplorable incidents' had occurred during the picketing and assured the House that those individuals responsible were no longer members (something which hardly endeared him to the South Wales men, particularly as the deal unravelled).

The Taff Vale judgement left the entire trade union movement alarmed that all their funds were now at risk in disputes. Bell worked hard in Parliament and through the TUC Parliamentary Committee to get a repealing Bill, and only narrowly lost the vote in the Commons in 1903. The issue was kept on the boil by the unions, their sponsored MPs and some radical Liberals. Eventually, Henry Campbell-Bannerman's radical Liberal government of 1906, was persuaded by the TUC and the much strengthened Labour Party, to sweep away the Taff Vale judgement and grant complete union immunity in the Trade Disputes Act of that year. This remained the legal framework for industrial disputes and union governance until the Thatcher reforms of the 1980s. Although subdued at the time, Holmes was later seen as 'the hero of Taff Vale', and could boast that it was the 'best £50,000 they had ever spent', energising the entire trade union movement. He became one of the ASRS⁄LRC-sponsored Parliamentary candidates, narrowly losing out on a Birmingham seat in the 1906 election. Holmes was the hero of the south Wales railwaymen and of most activists around the country, but the very bitter row with the General Secretary led to lasting bad feeling. Clearly, two very different philosophies on the conduct of disputes were informing this bitter falling out and it ran like a fault line along the entire union until Bell finally resigned in 1909.

The Labour Representation Committee

The LRC had grown from two sponsored MPs in 1900 (Bell, for Derby, and Keir Hardie, for Merthyr Tydfil) to 29 in the 1906 general election. Although still small by the standards of the other two main parties (the Liberals had 399 MPs), it was enough to show that they had arrived on the Parliamentary scene. This result was largely due to the wholesale affiliation of the major unions with funding to field fifty candidates - their reaction to the Taff Vale judgement. This success seems to have gone to the heads of the socialist element of the LRC who wanted to emphasise their distinctive appeal from a Liberal Party which then had quite a radical wing. Trade union MPs such as Richard Bell, were being actively courted by the Liberals, anxious to keep their union connections and working class support. So the LRC leadership decided to impose a Labour whip and strict party line. They had Richard Bell especially in their sights, as he seemed to treat the LRC leadership with disdain, especially those like Ramsay Macdonald and Philip Snowden whom he regarded as middle class politicians furthering their own careers under the new Labour banner.

In February 1903, this tension came to a head at the LRC annual conference in Newcastle when the majority of the now much larger affiliated membership supported the tougher line. They adopted a new constitution, which required that all candidates and elected MPs sponsored by the LRC must sign a pledge to accept the conditions of the Labour Party and the Labour whip. From that time onwards Bell endured much abuse from the sectarian wing of the Independent Labour Party and in the union over his stand against this pledge. At the 1903 LRC conference in Newcastle, he was not re-elected as LRC Chairman, and not even elected to its Executive by the now much larger union affiliates. A stubborn man, this probably set Bell on the course he was to follow in the next few years, which would ultimately deprive him of the union leadership.

Osborne's campaign

Walter Osborne was a delegate at the 1904 ASRS annual conference which debated Bell's stand on the pledge and he supported Bell whole-heartedly. However, there is no indication that they were associated. Bell, quite properly, would not see him when Osborne requested a meeting during the litigation leading up to the 1909 judgement and ensured that every obstacle was put in the way of Osborne's lawyers in their requests for documents. Nonetheless, Osborne regarded Bell's battle with the LRC over the pledge as central to his own campaign. Osborne's motives for bringing a legal case against the union have been speculated about since the Webbs' statement that 'he had been liberally financed from capitalist sources'. He defended himself vigorously against this charge, claiming that he had offered to open his subscription books to the branch, union headquarters and the TUC. George Alcock, the ASRS' first historian and one of their Trustees, who 'was shown some of them', seemed to have accepted his protestations. The Daily Express (then as now, an anti-socialist paper), in which a railway company director had a major shareholding, gave his appeals for funds to fight the case prominent coverage. Nonetheless, labour historian Henry Pelling's conclusion that 'he had no single backer', seems right. Nor is there reason to doubt his claim that the majority of subscriptions came from individual trade unionists and branches around the country, who objected to the Labour levy. We saw that nearly 5,000 ASRS members voted against the levy in 1906 and as Osborne was exploiting the gauche handling of the issue by the Executive and the LRC, and attracted significant publicity, is it any wonder that he came to be regarded as a champion of individual political liberty against collective tyranny?

Osborne was indeed a committed libertarian, for whom the fight for political liberty was enough to drive him for so long. Walthamstow was a very small branch of about forty members, which he seems to have founded to assist his challenge. As he later explained, it had to be someone like himself who took this case: someone based in London with an official union position, in secure employment and impervious to peer-pressure. This martyr complex is a significant indication of his motivation. As is clear from his extremely articulate books, Osborne was no ordinary railway worker, but an ideological campaigner (he also became a journalist) seeking to combat 'the evil influence of Socialism' in the unions. After the row at the 1904 Annual Conference over Bell's refusal to sign the Labour pledge and subsequent representations from numerous branches about the levy, the ASRS Executive took legal advice from two eminent King's Counsel, one a Liberal and the other a Conservative. Both advised that the existing rules and the changes attempted to validate the levy did not provide a legal basis for enforcing the levy on 'refusnik' branches. Accordingly, the union held a membership ballot on the question of a compulsory levy of one shilling a year: there was a very high turnout of 46%, which showed the unusual level of interest on a non-industrial issue, and a decisive 21,713 to 4,825 'yes' vote in favour of the levy.

Yet Osborne's interpretation was that 'only 21,713 supported the levy out of a membership of 54,928'. His argument that the leadership had 'purposely avoided' mentioning affiliation to the Labour Party, although true, seems pretty weak. The lively controversy he documented up and down the country over so many years, would have left nobody in that highly-networked union in any doubt where the funds were going. His justification for taking the matter to court to prevent the union having any political fund seems highly questionable. Unfortunately, because of the insensitive way the LRC and union Executive handled the matter, contrary to the General Secretary's advice, Osborne would find a ready ear in the higher echelons of the law courts a few years later. Osborne's supporters in the union dwindled after the 1905 ballot and the compulsory levy and Labour pledge were enshrined in the union rules with effect from 1 July 1906. At the subsequent AGM in October, which he attended as a delegate, Osborne found himself in a minority of 3 to 55 in a debate about 'the alleged dictation of the LRC.' This inability to persuade his peers in the union of his case was significant. Instead, sensing the outcome was a foregone conclusion, he threatened to apply for a legal injunction rather than be coerced into supporting the Labour Party. He claimed afterwards that many of the delegates who voted for the levy had been repudiated by their branches, which inundated the Executive with calls for a new ballot. He claimed that the Executive Committee were only able to 'sidetrack' this pressure for another ballot because the membership became distracted by a major official dispute with the railway companies in 1907 over union recognition and pay issues. His decision to commence legal action against the union that year calls in question his own commitment as an official and to the interests of the wider membership.

Outcomes

The ASRS and other unions were naturally very angry with the Law Lords' ruling of 21 December 1909. The judiciary had a long track record of hostile judgements against collective organisations such as trade unions, which they still viewed as unlawful conspiracies. It was not just unions and Labour people who perceived this as bias. Winston Churchill, then Liberal Home Secretary, expressed this forcibly in the debate on his Trade Union Bill of 1911 to reverse the Osborne Judgement:

where class issues are involved, and where party issues are involved, it is impossible to pretend that the courts command the same degree of general confidence. On the contrary, they do not, a very large number of our population have been led to the opinion that they are, unconsciously, no doubt, biased.

Indeed, this second major anti-union ruling within the space of five years confirmed this perception. It meant that the unions could not use the large political funds they had collected to support their candidates and the Labour Party generally in the critical elections of January and December 1910. However, most unions got around it by raising a voluntary levy, and the Labour Party returned 42 MPs who, due to severe Liberal Party losses, found themselves holding the balance of power. This forced Liberal Prime Minister Herbert Asquith to legislate to restore the unions' political disabilities and reverse the most objectionable parts of the Osborne judgement.

The new Liberal government's 1911 Trade Union Bill, introduced by Churchill as Home Secretary, included two major conditions. First, unions had to secure an initial majority ballot of all members to set up a political fund and validate a compulsory levy. Secondly, individual members had to be allowed to opt out of paying it, if they expressed their wish in written form. Neither the TUC nor the Labour Party would accept these conditions, effectively killing the bill. However, Ramsay MacDonald, now leader of the Labour Party, did a deal with the government to relieve the union situation by introducing salaries for MPs of £400 per annum. Eventually, the unions were persuaded that they could only get their political levies and funds back on a legal footing by accepting both of the Liberals' conditions and the Trade Union Act of 1913 enshrined this compromise. Despite the damage he had caused to the entire trade union interest, Walter Osborne was allowed to remain a member of the union with access to all internal circulars and other branches until 1910. He was eventually expelled in June 1910 over his refusal to hand over branch records and his subscription list. He took legal action, lost in the High Court and, of course, appealed. Faced with the prospect of the same hostile Court of Appeal, the union Executive gave in and reinstated him with costs. Soon afterwards, he left the union to become Chief Clerk of the British Constitution Association, a body very much in tune with his libertarian philosophy.

Conclusions

Then as now, at the heart of all controversies over political funding, is the importance of money in politics. The Railway Review saw this clearly with its observation in 1909, that 'the power of the purse is the power of life and death in representative government.' So, the Osborne Judgement tried to prevent trade unions exercising the power of their collective purse to build a separate political party to serve their interests. However, the unions were strong enough and campaigned effectively enough to reverse Osborne with the Trade Union Act 1913. However, the public interest in regulating the exercise of that power, was also evident in Walter Osborne's successful challenge to the ASRS compulsory political levy. Even though political objectives were made lawful for unions to pursue and fund collectively, Parliament also made it clear that such a fund needed the prior authority of an individual membership ballot. Unions also had to provide in their rules that members who did not wish to subscribe to the union's political aims need not pay.

The Osborne Judgement also established that crude 'paymaster' relations could not be imposed on sponsored candidates and elected MPs, requiring them to sign pledges to vote in particular ways. The infant Labour Party immediately dropped this ill-considered requirement, while securing its legitimate objective of maintaining a disciplined Parliamentary party by other political means. In practice, unions have subsequently exercised their influence with sponsored MPs extremely sensitivity. The Osborne Judgement was not just a product of its time. It highlights an important perennial strand of judicial thinking in how the Law Lords see their role within the constitutional powers of the state. In 1909, they saw an assertive trade union and labour movement, which they believed they had to restrain, as Parliament appeared to them unable to, having passed the Trade Disputes Act 1906.

The close linkage between the two major judicial interventions of the Edwardian age - Taff Vale and Osborne - is a reminder that the path of history is not predetermined. It is interesting to speculate about how things might have developed had the unions been engaged positively by the state. Had the legal framework inherited from the 1870s been developed towards a 'positive rights' approach in the period after Taff Vale, would the Trade Disputes Act of 1906 have shaped the negative, legal immunities model of the following seventy years? If the Law Lords had not intervened to threaten all unions' general funds with the Taff Vale judgement, would the Labour Party have received the funding and electoral deal it needed to launch itself so effectively in the 1906 election? In that event, would most unions have stuck with a the Progressive Liberal-Labour alliance, perhaps gaining a more established place in the then mighty Liberal Party and thereby bolstering that party's radical tradition and preventing its decline? Looking to the future and the prospects for further regulation of political funding in the wake of the 'cash for honours' abuses, one lesson of the Osborne saga, is that any future government and Parliament must give full consideration to the legitimate political objectives and aspirations of trade unions. The one-sided application of general solutions, such as Sir Hayden-Phillips' proposals to cap all donations at £50,000 and in effect to restore opting-in by all individual members, should not be embarked upon lightly. Even Margaret Thatcher pulled back from such narrow party moves in 1984. That is not to say that the disbursement of the trade union levies is immune from reform, but careful regard to the lessons of history requires a more considered approach to effective regulation of all political funding practices.

Further Reading

P.S. Bagwell, The Railwaymen: History of the National Union of Railwaymen (1963)

F. Bealy and H. Pelling, Labour and Politics 1900-1906: A History of the Labour Representation Committee (1958)

H. A. Clegg, A. Fox and A. F. Thompson, A History of British Trade Unions since 1889: Volume 1 (1964)

K. Ewing, Trade Unions, the Labour Party and the Law: A Study of the Trade Union Act 1913 (1982)

A. J. Reid, United We Stand: A History of Britain's Trade Unions (Penguin, 2005)

About the author

James G. Moher is a retired national union officer, having served with the Communication Workers Union and the Transport and General Workers' Union. He is legally qualified and obtained a Ph.D. in social and economic history from London University. A founder member of the History & Policy Trade Union Forum, he also lectures at Ruskin College, Oxford on trade union and labour history.

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